IIA IIA-CIA-Part2 Practice Test - Questions Answers, Page 2

In the context of the fraud triangle, the condition where a vice president's unquestioned authority enabled the theft of funds is best described as 'opportunity.' Opportunity refers to the circumstances that allow fraud to occur, including the ability to override controls or exploit a lack of oversight. This is one of the three elements of the fraud triangle, which also includes rationalization and pressure.

Reference: IIA Practice Guide -- Fraud and Internal Audit, COSO Fraud Risk Management Guide

According to IIA guidance, the chief audit executive (CAE) is responsible for evaluating and verifying management's response to audit recommendations. The CAE must also determine the need and scope for additional work based on the adequacy and timeliness of management's corrective actions. This ensures that the audit recommendations are effectively implemented and that any residual risks are appropriately managed.

Reference: IIA Standard 2500 -- Monitoring Progress, IIA Practice Advisory 2500.A1-1

According to the IIA Standards, the primary factors in determining the adequacy of an annual audit plan include sufficiency, appropriateness, and effective deployment of resources. These elements ensure that the internal audit activity can effectively cover key risk areas, provide relevant assurance, and utilize resources efficiently. While cost-effectiveness is important, it is considered less critical compared to ensuring the audit plan is comprehensive and appropriately targeted.

Reference: = IIA Standard 2010 - Planning.

According to IIA guidance, the CAE has the ultimate responsibility for the internal audit activity but may delegate tasks such as reviewing, approving, and signing engagement reports to qualified internal audit staff. This delegation helps in managing workload and leveraging expertise within the team. However, the CAE should still periodically review the reports to maintain oversight and ensure quality.

Reference: = IIA Standard 2060 - Reporting to Senior Management and the Board, and Standard 2400 - Communicating Results.

To measure the performance related to the quality of audit recommendations, the internal audit activity should focus on whether the audit findings were relevant and useful to management. This directly assesses the practical impact and value of the audit recommendations, ensuring that they address significant issues and assist management in improving operations and controls.

Reference: = IIA's Practice Guide on Measuring Internal Audit Effectiveness and Efficiency.

The most reliable assurance comes from findings that demonstrate both the identification of issues and the effectiveness of corrective actions. In the provided scenarios, the accounts payable audit (2) and the cash handling process audit (4) illustrate instances where issues were identified, and actions were either needed (2) or taken promptly (4), thus providing a clear basis for forming an opinion on internal control adequacy.

Reference: = IIA Standard 2410 - Criteria for Communicating and Standard 2500 - Monitoring Progress.

When there is a deadlock between the internal auditor and management over a significant issue such as access controls, escalating the issue to senior management is the most effective strategy. This approach ensures that the disagreement is addressed at a higher organizational level, where a decision can be made that aligns with the organization's risk tolerance and priorities.

Reference: = IIA Standard 2600 - Resolution of Senior Management's Acceptance of Risks.